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April 27, 2012

Chip Roame: The 2012 IA 25 Extended Profile

Breakaway brokers and movements of assets are near-term challenges for advisors

Chip Roame, Managing Partner, Tiburon Strategic Advisors

“It’s like drinking from a fire hose.”

Forgive us for using the cliché (again), but it really is the best way to describe a conversation with Chip Roame. The managing partner of research and consulting firm Tiburon Strategic Advisors employs a rapid fire delivery of critical information that industry leaders want; so much so that in addition to purchasing his services, they clamor to attend his twice-annual CEO summits, a who’s-who of the best and brightest that financial services has to offer.

He’s been named to lists of top industry thought leaders and influencers so many times that it must be old hat.

“It is, until I go home to my family and I’m reminded that I’m no big deal,” he says.

Although Tiburon intends to remain a mid-sized, boutique management consulting firm, Roame is looking to the future in how its information is delivered.

“We used to send our reports to clients, but no longer,” he explains. “We’re building out our research topics and now sending links to our reports. We want to blanket financial services in terms of researching industry trends, as well as specific companies. The client will have live access to updates as they occur, some of which are updated daily and others that are updated maybe five or 10 times a year.”

“These are the other people your readers read about,” he says before adding in typical Roame style, “They’re the studs of the industry.”

Asked about near-term trends that most affect advisors (his specialty), he doesn’t hesitate.

“The trends are perfectly clear, and each has its own inflection point,” he says. “The first is the issue of breakaway brokers and the differing views of how substantial it is currently and how much bigger it will get. I don’t mean the ‘broken’ breakaway brokers; the guys at the bottom of the Merrill training class that got fired. I mean the guys that are leaving on their own.”

Roame says the overall number of breakaway brokers might not be big, but the assets they take with them certainly are, which have an outsized impact when moved because of the independent channel’s smaller size.

The inflection point, he says, is whether or not wirehouses will shut this down, either by increasing up-front payments or creating a halfway house model like Wells Fargo. (See our profile of John Peluso for more about Wells Fargo).

The second issue Roame sees is the increased polarization of the investment space, in which “the tails are growing, but the middle is not.”

“Low-cost indexing is growing, high-cost hedge funds are growing, long-only managers are not,” he says. “ETFs are going well, for instance, and hedge fund managers certainly aren’t lowering their fees. The inflection point here is whether or not the long-only managers figure out a way to beat their benchmarks or lower their costs to keep assets.”

The third trend he sees concerns the motivation of leading advisors; will they choose to be a mass marketer like Ric Edelman or Ken Fisher or a niche marketer like Hanson-McClain?

“This will also affect the technology strategy they employ,” Roame says. “Wirehouses were traditionally proprietary, while the independents used third-party platforms. The third-party platforms have one. The inflection point here is whether or not the wirehouses will begin to outsource their technology. Will we see an announcement from Merrill that they’ve partnered with Black Diamond or Orion.” (See our profile of Eric Clarke for more about Orion Advisor Services.)

“If they begin using third-party technology, it might exacerbate the breakaway broker trend, as it would be easier to make that transition if the platforms are aligned.”

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